Yesterday evening saw the Conservative leadership campaign kick-started in to action, with the final 10 candidates for the battle to be the next Prime Minister announced.
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The pound reacted steadily to the news, but there is likely to be a stronger reaction as the battle intensifies and the candidates are whittled down further, depending on the stance and proposed policies of the candidate who looks most likely to win. If it is a Brexiteer candidate looking for a hard-Brexit, or even a no-deal, then it is likely we could see the pound under significant pressure.
With the 10 candidates in place, all eyes now turn to the voting which will begin on Thursday this week. All 313 Conservative MPs will vote for their number one choice for Number 10 in a succession of ballots this month on the 13th, 18th, 19th and 20th June until the 10 are whittled down to the final two contenders. The final vote will involve all 160,000 or so members of the Conservative Party and the winner will likely be announced towards the end of July.
This sequence of events could create market volatility as the leadership campaigns commence and the runners and riders outline their manifestos. You can find out how your currency transfer is being affected by contacting your account manager who will be able to keep you up to speed with the latest developments.
The biggest fall for the pound yesterday, came first thing in the morning, with the announcement that the UK economy contracted by 0.4% in April, the sharpest fall since March 2016. This saw the pound fall significantly against the euro with the interbank rate coming extremely close to breaking through the 1.12 level of support.
The main reason for the economy contracting so sharply was down to the biggest decline in car production in April since records began and is directly linked to the uncertainty surrounding Brexit.
At the beginning of this year many car manufacturers had announced temporary closures for April in anticipation of disruption due to the UK’s planned exit from the EU in March, but the last-minute delay until October meant that it was too late for businesses to change their plans, hence a fall in production in April of 24% MoM.
This is a clear sign of how much Brexit uncertainty is beginning to weigh on the economy and could pave the way for a similar tone from upcoming data releases. This morning sees the release of average earnings and unemployment figures for April, so any clients buying or selling pounds should keep an eye on these figures at 09.30.
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